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Adidas,
the maker of sportswear and sports equipment, should be a winner for investors.

Germany-based Adidas, which sells products under its own name worldwide, also owns the Reebok, TaylorMade, and Rockport brands. It performed strongly in 2012, and that momentum should continue through 2013 and beyond. Double-digit growth in earnings per share could drive up the stock by more than 20% in the next 12 months.

The Adidas ADRs have gained 25% in the past 12 months and 11% this year, but still are almost 7% below their 52-week high of $52.92. The maker of sneakers and sweats, which has a market value of more than $20 billion, is expected to report earnings per share of $2.91 in 2013, versus 2012's $2.49.

LAST YEAR'S RESULTS were tarnished by Reebok's disappointing performance. The brand was hurt by the termination of an NFL licensing agreement and the discovery of financial irregularities in India that prompted a restatement of accounts. However, Adidas, which has developed collections around sporting superstars like basketball's Derrick Rose and soccer's Lionel Messi, is reaping the rewards of a plan devised in 2010, aimed at raising sales 45% to 50%, to 17 billion euros ($22.26 billion), over five years, reaching a sustainable profit margin of 11%, and increasing earnings at a compound annual rate of 15%.

Adidas is making huge strides toward those goals. Sales this year are estimated at €15.44 billion ($20.26 billion), up from €14.88 billion in 2012 and €11.99 billion in 2010. The profit margin dipped to 7.2% in 2011, but recovered to 8% last year and should hit 9% this year. And from 2010 through 2012, earnings grew ahead of the target level, at a compound annual rate of 18%. This year's expected rise is 16.9%.

More than half of the anticipated increase in sales should come from faster-growing regions like North America, China, and the Commonwealth of Independent States (made up of former Soviet republics). Adidas hopes to boost penetration in North America, which accounted for 23% of sales in 2012. Chinese sales grew 15% but account for just 11% of the total. The company is opening stores there rapidly, to take advantage of an increasingly wealthy middle class. Western Europe generated 27% of sales, the biggest share.

This year, there is no major global sporting event like the Olympics to aid Adidas, but the buildup to soccer's 2014 World Cup should help in the second half. (In 2010, Adidas made the official World Cup ball; it's likely to do the same in 2014.) Adidas also will get a leg up from "energy boost," a potentially revolutionary cushioning technology for sports shoes that has received an encouraging reception. Overall, the German company is well positioned for global gains.

Adidas has a net cash position of €448 million and a recent track record of raising dividends, its preferred method of returning cash to shareholders. The ADRs currently yield just 1.3%, but shareholders should get better returns in the future—especially if Adidas outruns its rivals.

Sold World

Europe's major bourses fell, led by drops of 3.7% in Germany and 3.2% in Sweden.